Analysing historical Performance

Financial statements of matrix Limited for the Preceding three Years

Three Years (years 1-3)

In Million

Profit and Loss Accounts

1 2 3
Net sales 180 200 229
Income from Marketable securities - - 3
Non – operating income - - 8
Total Income 180 200 240
Cost of goods sold 100 200 240
Selling and General Administrative 30 35 45
expenses
Depreciation 12 15 18
Interest expenses 12 15 16
Total cost and expenses 154 170 204
PBT 26 30 36
Taxes 8 9 12
PAT 18 21 24
Dividend 11 12 12
Retained Earnings 7 9 12

Balance Sheet
1 2 3
Equity Capital 60 90 90
Reserves and Surplus 40 49 61
Debt 100 119 134
Total 200 258 285
Fixed Assets 150 175 190
Investments - 20 25
Net current assets 50 63 70
Total 200 258 285

Reorganising the financial statement handles over the following parameters:

a. Operating Invested Capital:

 Total assets in the balance sheet
 Net operating fixed assets like surplus fund
 Excess cash & marketable securities
b. NOPLAT: Net operating profit less adjusted taxes
 NOPLAT= EBIT- taxes on EBIT
 While calculating EBIT the following parameters like interest expenses, interest
income and non operating income (or loss)
  Taxes on EBIT represents the taxes the firm would pay if it has no debt, excess
marketable securities or non operating income (or loss): attributable to interest
expenses, interest and dividend income, non operating income.
c. Return on invested capital:
ROIC= NOPLAT/Invested capital
 ROIC focuses on the true operating performance of the firm.
d. Net investment: Difference between gross investment and depreciation
 Net investment = Gross Investment – Depreciation
 Gross investment: sum of incremental outlays on capital expenditure and net
current assets
 GI= (net fixed assets at the end of year+ Net current assets at the end of year)- (net
fixed assets at the beginning of the year+ Net current assets at the end of the year)
e. Free cash flows: it is the post tax cash flow generated from the operations of the firm after
providing for investments in Fixed assets and net current assets required for the operations
of the firm.
 FCF: NOPLAT- Net Investment
 FCF: (NOPLAT+ Depreciation)- (Net Investment + Depreciation)
 FCF: Gross cash flow- gross Investment

S. No Particulars Year 2 Year3

1. Invested capital
2. NOPLAT
3. ROIC
4. Net Investment
5. Growth rate
6. FCF